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The Nation; Trying to Fight Two Wars at Once

PRESIDENT BUSH has discovered how hard it is to fight two wars at once.

Since the attacks he has been trying to steel Americans for a protracted struggle against an elusive foe, warning that ''a lengthy campaign, unlike any other we have ever seen'' lies ahead. The stock market reeled.

Last week, Mr. Bush also stood at Reagan National Airport, a runway's length from the Pentagon, and took on another threat. He said the airport should reopen immediately as a ''symbol that America is back in business.'' The Secret Service, worried about the security risk, cringed. But the stock market surged.

The administration is battling both global terrorism and economic malaise and is taking some friendly fire. Defeating terrorism requires unprecedented vigilance by airport security and border control agents, passengers on planes and buses, and bank managers who must assume any person could be suspect. Reviving the economy requires more risk-taking by investors, tourists and consumers who believe that the world is small and tomorrow will bring greater prosperity.

America will never be the same. The American way of life will never die. It is tricky to have it both ways.

''When you are telling people that we have a new, unsettled world it makes it that much harder to sustain a sense of well-being,'' said James R. Schlesinger, the former defense secretary who is now a senior advisor at Lehman Brothers, an investment bank. ''The idea of a higher level of tension is not conducive to the sort of consumer confidence we have grown accustomed to.''

The insidious challenge of terrorism is that America's leaders have to project caution and optimism. They try to persuade people that the world has changed, requiring heightened levels of security in everything from cyberspace to buses. Yet consumers should also act as if everything is fine -- pile up credit card debt, buy a dream house or take the kids to Disneyland.

The matter is so touchy because in times of crisis the president and his cabinet have unusual sway over mass psychology, and psychology drives the American economy. Consumer spending and business investment account for the vast majority of economic activity, and they fluctuate depending on how much confidence people have in the future. The United States has had the world's strongest economy, at least in part because it is home to the world's most optimistic people.

Franklin D. Roosevelt appealed to that optimism with his exhortation during the Depression, ''the only thing we have to fear is fear itself.'' So did Ronald Reagan with his ''Morning in America'' campaign.

Mr. Bush and his team have a tougher task. They cannot blithely claim tomorrow will be a better day when the nation faces the possibility of a cycle of terrorism and retaliation. Complacency could be an enemy in that struggle. Yet the administration is also starting to worry that all its war planning damages consumer confidence, which many economists believe has dropped sharply from already depressed levels.

Not coincidentally, Mr. Bush is now seen more in settings designed to rebuild confidence. His public agenda last week included meetings with Congressional leaders to discuss the budget. He flew to New York to announce his support for a big dose of stimulus spending. He dined out at a steak house in Washington.

But with every word being parsed, he and other top officials have to strike a delicate balance. Attorney General John Ashcroft wanted to pressure Congress to grant him new security powers when he warned that Americans had by no means seen the end of terrorist attacks at home. ''There is a very serious threat of additional problems and, frankly, as the United States responds, that threat may escalate,'' he said.

After gas-mask sales soared and Wall Street traders blamed the comments for Monday's sell-off, administration officials scrambled. Mr. Ashcroft's warning was not based on fresh intelligence, they said. Mr. Ashcroft tried to soothe nerves. ''There shouldn't be a cultural paralysis that curtails our activities,'' he said.

It is too early to assume the economy is paralyzed, of course. The terrorist attacks, themselves, probably did no more damage to overall output than a serious earthquake or hurricane. Reconstruction spending could actually boost the economy in some areas. The Federal Reserve's rapid-fire interest rate cuts should, ultimately, encourage people to borrow money at historically low rates and spend or invest it. Meanwhile, Congress is set to approve tens of billions of dollars in new spending.

BUT if Mr. Bush is right about a long struggle against a resilient enemy, the downturn could persist longer than it otherwise would.

Exuberance fired the 1990's boom, with consumers and businesses spending freely on the promise of ever-greater returns. That bubble was deflating even before the twin towers fell, adding fear to the mix. Economic models suggest low interest rates will eventually stoke consumer and business spending. But models do not measure emotion well, and few economists dare predict when people will stop feeling vulnerable.

Other countries have grappled with terrorism. The Irish Republican Army bombed shopping malls in London. Basque terrorists have tried to destabilize Spain. Suicide attacks are a daily reality in Israel.

But there is a chance that Americans will start acting like the Japanese, whose confidence levels have fallen for a decade. Despite interest rates at zero and a government that has generated gigantic deficits to fuel economic activity, the Japanese lost faith in their economic prospects. Few trust the promises of their leaders to deliver a better future.

The risk is not negligible. The Treasury secretary, Paul H. O'Neill, was criticized early on for predicting that stocks would rally (they slumped) and that the economy would avoid recession (most economists agree one is inevitable). No one faults him for sounding optimistic, but there is a fine line between upbeat and glib, and some critics felt he crossed it. Searching for a beacon on stability, Congress invited a former Treasury secretary, Robert E. Rubin, to consult on remedies.

Now, Mr. O'Neill has sought to send a sober message about the interplay between the terrorist threat and the economic slump. He said Americans, like their leaders, will have to be cautious and confident.

''In a society like ours, that's marked by freedom and individual liberty,'' he said, ''we've got to be able to assure people that they're not at huge risk to malevolent, terrible people. Then I would say that our economy is so strong and our potential is so great, that whatever the cost is, we'll suck it up and be able to absorb it.''